Cash accounting basis - using a credit to pay an old invoice puts tax in wrong tax period

AndrewAndrew Member Posts: 46
edited June 2018 in Accounts Business Range
With Accounts Premier...

I never received a bunch of March invoices from a supplier until May (had been charged to another customer by mistake).  I also had a credit with this supplier from March.

So when I paid one of these old invoices using the credit, the tax is accounted for in that old closed off tax period (Feb/March).
This must be because both the original payment (credit) and invoice are dated in the tax period.

The other March invoices that were paid in May are showing in the correct April/May accounting period as expected using a cash basis.

I have also just tested applying that credit to a newer invoice (applying a March credit to a May invoice) and that also shows in the April/May accounting period.
Is there a better way to get around it than this?


  • Robert SmeallieRobert Smeallie Member Posts: 84
    edited June 2018
    Hi Andrew,

    Normally when account straddle two reporting periods you need to use the General Journal entry to apply the earlier invoices to the (Liabilities) Accounts Payable item in the Chart of Accounts then apply a contra entry in the supplier account (Expenses) section. What you are doing with paying the outstanding Invoices with credits in the Supplier account is just part of the exercise - applying an Expense item against the Accounts Payable for the supplier - but the rest of the payments can be carried over into the subsequent BAS reporting period OK.

    Robert Smeallie
  • AndrewAndrew Member Posts: 46
    edited June 2018
    Hi Robert, thanks for your reply.

    I don't properly understand why I would normally need to use a General Journal entry when other 2 scenarios seemed to work fine...

    Scenario A - Invoices entered in earlier BAS period and paid in later BAS period have always been OK and reported as expected.

    Scenario B - Using the credit from the earlier BAS period to pay for the invoice in the later BAS period also worked fine.  This reported in the later period although the payment (credit) was made in the earlier period.  Must be that cash basis uses whichever is the later date to report on???

    Are you saying it journal enteries should have been required there also?  As long as it reported in the correct period (current, rather than a prior closed off period) I thought all was OK.

    It was only Scenario C that is resulting in an undesirable outcome - Using a credit from a closed off period to pay an invoice dated in the closed off period but only entered afterwards.

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